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What is the difference between GST and VAT tax?

Value-added tax (VAT) and sales tax are two separate entities that serve two different purposes. Both sales tax and value-added tax (VAT) are indirect taxes: they are taxes that are collected by the seller and then passed along to the buyer in the form of a price.

By Cheap Accountants in LondonPublished 3 years ago 3 min read
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VAT and GST

If you're looking up business taxes and the term “GST” comes to mind, know that it's an abbreviation for the Goods and Services Tax, a national sales tax in Canada. You'll discover that GST and VAT are nearly identical. There are many differences between Value-Added Tax (VAT) and Goods and Services Tax (GST). It will definitely impact your business. There is nothing to worry about. Use our handy guide to discover everything you need to know about how GST and VAT taxes work for UK businesses.

Do you know what VAT is?

Value Added Tax (VAT) stands for a value-added tax. The good or service you are purchasing is subject to a consumption tax. In general, the price of most goods and services is influenced by VAT. With respect to the tax that is applied to sales and purchases, it's a form of indirect taxation because the government doesn't levy it directly from customers. Rather, businesses pay the tax in advance and the government receives it later.

An overview of the current tax situation

The Goods and Services Tax (GST) is a charge on all goods and services. To these countries, it is known as Value Added Tax (VAT). It is essentially a VAT imposed on the prices of goods and services. Once you discover that GST applies to your business, it's highly recommended that you register for it right away to prevent large penalties from being imposed.

Sales tax and value-added tax are commonly cited as a reason for tax compliance difficulties within the corporate tax community. Let's illustrate these two different indirect taxes, in the hope of explaining the differences between them.

VAT

The difference between GST and VAT

There are many instances where we can replace "GST" and "VAT" with the word "tax." A VAT (or a Goods and Services Tax, as it is also known) is simply a type of sales tax, and likewise, a VAT (or a Goods and Services Tax, as it is also known) is simply a type of sales tax. British companies don't need to worry about differences in GST/VAT because it will not be relevant to them. The two most notable exceptions to this rule are (1) if your company does significant business in any of the countries in which GST/VAT applies, and (2) if your company is in any of the countries in which GST/VAT is applied.

Tax rates: VAT tax rates tend to be higher than GST tax rates. Whereas the UK's VAT is 20%, Canada, Singapore, and Australia use a tax known as the Goods and Services Tax (GST) with a rate of 10%, 7%, and 5%, respectively.

tax-free/exempt items Additionally, note that some goods that are exempt from value-added tax (VAT) may not be exempt from goods and services tax (GST). For example, gold is VAT-free in the UK, but silver, palladium, and platinum are not exempt from GST in Australia.

VAT and GST registration requirements are unlikely to be the same across countries. GST registration is required if your total turnover exceeds AUD75,000. The threshold for the Value-Added Tax (VAT) is £85,000.

There are multiple differences between VAT and GST, as you can see. You might consider outsourcing your tax filing tasks if you're dealing with both VAT and GST.

We're here to help

By getting the services of cheap accountants in London, your company will be able to cut down their tax rate at minimum. Our team of qualified accountants in London will help you to set up an automatic payment collection system. With the help of this, you'll be able to cut down on your team's admin workload when chasing after overdue invoices.

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About the Creator

Cheap Accountants in London

Cheap Accountants in London are proud to offer wide range of affordable accounting and taxation services to businesses nationwide. Our qualified accountants ensures that you get the best service at a fraction of the cost.

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